All India Power Engineers Federation (AIPEF) has urged the government of India that burden of new emission norms for thermal power stations should not be passed on to common consumers by tariff hike. The Federation has also demanded for CAG audit of all independent Power Producers (IPPs) to check the actual expenditure on adopting new emission norms.

AIPEF has asked the centre and the state governments to bear the
expenditure on new emission norms and not to burden common consumers
on this account. The Federation has questioned the assessment of ICRA
regarding hike of power generation cost by 13 to 22 paise per unit
and has asked ministry of power to clarify it by giving actual
details of expenditure on new emission norms.

VK Gupta, a spokesperson of AIPEF, said that according to ratings
agency ICRA, thermal power companies would spend around Rs 1.2 lakh
crore to conform to the new norms over the next 2-3 years. Thermal
power producers are free to pass on the cost of conformation to
standards to consumers who would see power costs go up between 13 and
22 paise per unit.

In
Focus

The revised emission norms notified by the Ministry of Environment
and Forests for thermal power projects are likely to impact 187000 MW
of operational coal-based capacity and 74000 MW of under-development
capacity.

As per ICRA's estimates, these norms would entail a capital
investment of Rs 60 lakh to Rs 1 crore per MW, based on the age of
the plant. This amounts to an aggregate capex requirement of about Rs
1.2 lakh crore, which is likely to materialise over a 2-3 year
period. This is likely to result in an increase in the cost of
generation of such plants by about 13-22 paise/unit on account of the
capital charges alone, apart from entailing additional O&M
charges.

The MoEF had, earlier in December 2015, notified revised emission
norms for TPPs with the objective of minimising emission of
particulate matter, sulphur dioxide, oxides of nitrogen and mercury
and also reduce water consumption.

The existing thermal power plants are required to follow the
revised standards within two years from the date of publication of
the notification -- December 2015, whereas new plants starting their
operations from January 2017 are required to comply with these norms
from the commissioned date.

Compliance by the generating companies or Independent Power
Producers to meet these norms, within the given timeline, remains
challenging, due to their apprehensions in terms of cost
recoverability and timely approvals for the pass-through of such a
cost under the change in law by the regulators.

Power generating companies are likely to be able to pass on the
higher cost of generation to the off-takers, primarily state-owned
distribution utilities under the 'change in law' mechanism in the
power purchase agreement. This would put an upward pressure on the
retail tariffs, which could be seen in the financial year 2019,
assuming that the generating companies implement the revised norms
over the next two years.

Further, adequacy of tariff hikes by the regulators for the
distribution utilities factoring such an increase in the cost of
coal-based generation remains important from their cash flow
perspective.